Rising petrol prices and the cost of living will hurt Morrison — and he can’t blame it all on Putin
By Sourced Externally
March 16, 2022
Back in November, the Prime Minister seemed to suggest he had some influence over petrol prices.
Inflation was taking off in the United States and Scott Morrison was pointing to the Australian experience and his superior ability to keep prices down.
“I think it does highlight Australia’s economic recovery has to be secured by people who have a track record in economic management, otherwise you will see petrol prices go up, you will see electricity prices go up, you will see interest rates go up, more than they need to,” he said.
At the time, some of the Prime Minister’s colleagues were uneasy about this line of attack — particularly those with long memories.
They recalled John Howard’s famous 2004 election campaign pitch. The then prime minister gave a “guarantee that interest rates are always going to be lower under a Coalition government” than under Labor.
Howard won the election, but interest rates started climbing soon after and each time they did, he was dogged with reminders of his “guarantee”.
Rates ultimately rose six times over the following three years, including during the 2007 campaign. The Coalition lost the election and Howard was defeated in his own seat.
As the Prime Minister now rightly notes, this price spike is beyond his control. Australian governments, it turns out, can’t stop global oil prices from climbing. Not when the world’s second-largest oil exporter is hit with unprecedented sanctions for waging a war in Ukraine.
The problem for the government is the cost-of-living pinch isn’t just being felt at the bowser. Companies from Arnott’s to SPC, Tip Top and Bega Cheese are all warning their prices will have to rise as input costs climb. It’s hard to pin all of the blame on Putin.
The government has a strong economic story to tell when it comes to Australia’s COVID recovery. Growth is stronger and unemployment is lower than most had expected. Inflation here isn’t nearly as high as it is in the United States or the United Kingdom — at least not yet.
But that doesn’t mean rising prices aren’t biting. Even Morrison’s “quiet Australians” would be feeling the impact.
The first task for the Prime Minister is to show he “gets it”. Six weeks ago, Morrison couldn’t name the price of bread or petrol when asked at the National Press Club. “I’m not going to pretend to you that I go out each day and I buy a loaf of bread and I buy a litre of milk,” he said.
Now the Prime Minister has those figures (particularly the daily petrol price) front of mind and cites them unprompted. He empathises with those who do go out each day to buy the basics.
“These pressures are real,” he said and hinted at help coming in the federal budget, now just 12 days away. “I can assure you, the Treasurer and I have been keenly focused on ensuring that we can address some of these immediate pressures when it comes to the cost of living that Australians are facing.”
Addressing “immediate” pressures suggests some sort of instant relief. Whether that’s in the form of a fuel excise cut, other tax relief or some other immediate hand-out has been the subject of much internal debate and external speculation.
Without joining the pre-budget guessing game, let’s outline the conundrum facing the Treasurer.
Josh Frydenberg is already facing the task of delivering a budget six weeks earlier than normal, against the backdrop of a war in Europe, global economic turbulence, horrific floods at home and the prospect of another COVID wave over winter.
Now he has to walk the tightrope of delivering some sort of cost-of-living relief without fuelling inflation further by pumping extra stimulus into the economy.
The Treasurer will at least have an improving budget bottom-line to show off, thanks to the sharper than expected fall in unemployment. There will still be plenty of red ink, but the deficit for 2022-23 won’t be quite as bad as the $99 billion previously forecast.
Frydenberg’s three previous budgets have delivered the government a boost in Newspoll. The last two were only short-lived improvements, but the 2019 pre-election budget provided a platform for Morrison’s “miracle” win.
That budget was full of good news, including a “back in black” surplus promise (which was never achieved) and $158 billion in income tax cuts over the coming decade (some of which has already been delivered).
A timely reminder
There’s no scope for anything like this sort of pre-election bounty this time around.
The government is also significantly further behind in the polls than it was in 2019. Frydenberg’s degree of difficulty is much higher.
Labor says it’s ready for an election fight over cost of living and, specifically, wages failing to keep up with rising prices. The Prime Minister, too, says the campaign will be about economic management and “who’s best to manage the pressures on rising interest rates”.
The next set of official inflation figures, the March quarter Consumer Price Index, will be released on April 27 — midway through the election campaign.
They’ll be distorted by the Putin petrol price spike, but will still provide a timely reminder amidst the heat of a campaign of the limits on what governments can, in fact, control.